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Pros and cons of having multiple savings accounts

Feb. 19, 2020 • 5 min read

What we'll cover

  • How many savings accounts you can open

  • How to prioritize investing

  • How to use one account for multiple savings goals

Let’s keep it simple: There’s no limit to the number of savings accounts you can open. The tricky part? Knowing whether or not it’s worth it to have multiple ones.

While opening more than one savings account may help you keep several savings goals (retirement, vacation,  future down payment ) organized, it could mean more monthly statements to track and balances to manage with potentially less overall interest earned across several accounts.

Your other option is to keep all of your savings in one account. But, when all your money is held as one lump sum, it can be tricky to keep track of your specific goals and the progress you’ve made toward each. So, how do you decide which savings method is best?

Read on to learn about the pros and cons of having multiple savings accounts. Plus, find out how you can separate your financial priorities and  stay on top of them  — all within one single account.

How many savings accounts can I open? Know the basics.

Savings accounts are generally easy to open, and as we already mentioned, there’s no limit or penalty for having multiple ones. Online savings accounts can be opened from just about anywhere and give you the convenience of 24/7 access to your funds.

When you open any type of savings account, whether at an online bank or brick-and-mortar, be sure to compare minimum opening deposits, minimum balance requirements and fees, along with interest rates and customer service reviews.

Ideally, you want to keep your money in a high-yield savings account to maximize your  annual percentage yield (APY) . APY is the total amount of interest you earn on a deposit account in a year. It factors in interest rates and compound interest.

Keep in mind, online banks like Ally Bank typically offer higher interest rates than traditional banks.

Benefits of multiple savings accounts

Sometimes, having numerous, separate savings accounts can be a helpful component of a robust financial strategy.

Some banks allow you to link a savings account to your checking account to help protect you from overdrawing. If a transaction would overdraw your account, as long as your savings account contains enough funds, those funds will be transferred to your checking account to keep it from being overdrawn. In this scenario, the money in the account could help you avoid a fee from your bank, should you accidentally overdraw your checking balance.

In other instances, multiple accounts could help prevent you from spending your savings. How so?

A large factor of saving money is mental, and when you can see your money, you’re much more tempted to spend it. If you’re saving for a potentially large expense (like when  building an emergency fund , an essential pillar of financial health) or long-term goals, you might think about opening a separate savings account. Keeping a separate account might help remind you not to touch that account for other spending purposes.

With these funds out of sight, they’ll be out of mind — reducing the urge to make withdrawals.

If you set up direct deposit, you can automatically put money in your account and allow it to grow — untouched and unseen — until you’re ready to use it.

Multiple savings accounts can also be a positive move for you if you’re married or considering combining finances with a partner. While you might open a joint savings account for things like mortgage payments and your children’s education, you may both also want to maintain your own personal savings accounts as well.

Lastly, opening more than one account could be beneficial if your savings exceed the limit insured by the Federal Deposit Insurance Corporation (FDIC). FDIC coverage caps at $250,000 per deposit account. That means if you’re holding more than that amount in one savings account, moving your excess funds to another account at a different FDIC-insured bank or financial institution can be a strategy to maximize your coverage and ensure protection for all your dollars.

Drawbacks of multiple savings accounts

When you’re saving for multiple things at once, it’s difficult to keep things organized. Opening separate savings accounts for each goal (new car, emergency fund, kitchen expansion) is one solution.

But while this strategy will keep your money separated, it requires you to stay on top of multiple accounts and keep track of numerous balances, account numbers, and login credentials. Plus, you’ll have to deal with the inconvenience of transferring money across accounts — and possibly between different banks.

Not only will this require some serious organizational skills, but it can also be time consuming and cause additional wait times during money transfers. Plus, if you leave certain savings accounts out-of-sight and out-of-mind for too long, you might actually forget to tend to them — potentially stunting your savings strategy.

And finally, spreading your savings across different balances, accounts, and banks may leave you earning less overall interest, if the APY rates vary on the different accounts.

After hearing the pros and cons of multiple accounts, you’re probably wondering, is it possible to get the positive aspects of multiple accounts without the negatives? Is there another option? Let’s compare.

Compare the benefits of multiple vs. one savings account

What is SIPC insurance? 

Comparing the benefits of multiple savings account vs. our Online Savings Account
Multiple savings accounts Our Online Savings Account
Keep certain funds out of temptation's way in a separate account Organize multiple savings goals in one place with up to 10 digital buckets
Separate a joint savings account from a personal one Visualize your progress on multiple goals at once
Avoid exceeding the FDIC coverage limit per deposit account Avoid tracking and balancing multiple savings accounts
Depending on your bank, protect yourself from overdraft, if you have multiple checking accounts Easily transfer funds between savings goals without limit

One account, multiple savings goals

For a solution that combines the ease of keeping your savings in one single account with the organization of keeping your goals separate, consider our buckets tool, which allows you to separate your savings into different categories (up to 10), all within one  Online Savings Account .

By divvying up your savings in customizable  buckets  (you can even make one for that designer handbag you’ve been dreaming of), you can easily visualize the progress you’re making toward all of your long- and short-term goals — no mental math required. You can take a quick look at the balance in your vacation bucket, for example, without having to subtract an upcoming house payment to check your progress.

This strategy can help you plan for all types of future costs, whether it’s holiday shopping or an annual bill you want to prepare for. Let’s say your homeowner’s insurance is $900 annually. If you divide that amount by 12, you get $75 — so you know if you deposit $75 into the dedicated homeowner’s insurance bucket each month, you’ll have enough for the premium when it’s due.

Naturally, your goals may change over time. That’s why the buckets tool is flexible and can be easily adjusted to stay in line with your priorities.

Plus, no matter how many separate buckets you use, you’ll still be taking advantage of compounding interest on the total amount in your account — so you can continue to accrue money on top of your already hard-earned savings.

You have multiple ambitions in life — as well as numerous financial goals. It’s time your savings account reflects that. With our  Online Savings Account buckets tool , you can easily organize all of your various long- and short-term goals into digital envelopes to help you become a savvier saver. And when done strategically, multiple savings accounts can also be a beneficial tactic on your journey to wealth wellness. When it comes to smart saving, there’s no one-size-fits-all solution — and the best option is the one that works best for you.

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